Paper ind againt custom cut, wants fund creation

New Delhi, May 27: Reeling under pressure of raw material scarcity and 'serious' technology gap and competition from various countries, the paper industry is in dire need of reforms.

Industry chamber FICCI today suggested the creation of a Technology Upgradation Fund (TUF) and rationalisation of customs on import of plant and machinery and cautioned against reduction of duties on paper under Free Trade Agreements (FTAs).

Currently, the size of the Indian paper industry is around 6.7 million tonnes per annum.

The survey was based on the feedback from major paper manufacturers and also the associations that represent a large number of small and big paper mills in India.

The total domestic demand for paper is around 7.2 million tonnes whereas the production is 6.7 million tonnes.

The survey estimated that the gap may widen if adequate steps are not undertaken both by the industry and the government to spur the growth of the sector.

Imports of paper have grown at a rate of over 19 per cent per annum since 2001-02 whereas in April-January 2006-07, it increased to 22 per cent.

The raw material, whether wood or waste paper is not available in adequate quantity in the country to sustain the growth rate of over nine per cent of the industry, the survey said.

In case of wood-based paper mills, the Government policy does not allow corporate sector to use forest for sourcing woods.

In order to overcome the raw material shortage, the government should permit industrial plantation on degraded forest lands, said the survey.

The cost of the production of one tonne of paper increases by 130 dollars in India as compared to other countries, the reason being shortage of raw material (not factoring-in other inputs' cost).

The survey also indicates a technology gap between the domestic paper industry and the competing countries.

Most of the paper mills are running on old technologies, which results in low productivity and high cost of production.

The survey showed all the respondents strongly felt that custom duties on paper should not be reduced under the FTAs.

Currently, the basic custom duty on paper is at 10 per cent, which is the peak rate.

Countries from which there could be a surge in imports of paper if the custom duty is reduced or eliminated are Indonesia, Thailand, Brazil, Chile, China, South Korea, the US, EU and Gulf countries.

The other suggestions made by the respondents in the survey were the need for fiscal incentives for promoting and increasing research and development in the industry and concessions towards import of environment related equipment for better environmental compliance.

The survey estimates the size of the industry to be around 10 million tonnes by 2010. The industry is expected to grow at the rate of eight to nine per cent per annum for the next few years. The industry grew at the rate of 7.2 per cent per annum for the period 2001-02 to 2006-07.

The demand for paper in India is growing at the rate of seven to eight per cent per annum, compared to two to 2.5 per cent in developed countries.

In view of this growing demand, the domestic paper manufacturers have indicated that they intend to substantially increase their investment in the coming year.

As a result of these capacity additions, the production of some of the large manufacturers is likely to double in next one year, according to the survey.

UNI